TNC

Tennant Co.

Industrial/Transportation


Presented:05/20/2020
Price:$58.07
Cap:$1.07B
Current Price:$93.37
Cap:$1.77B

Presented

Date05/20/2020
Price$58.07
Market Cap$1.07B
Ent Value$1.38B
P/E Ratio23.62x
Book Value$19.38
Div Yield1.52%
Shares O/S18.44M
Ave Daily Vol95,122
Short Int3.27%

Current

Price$93.37
Market Cap$1.77B
Tennant Co. engages in the design, manufacture, and marketing of cleaning solutions. Its products include equipment for maintaining surfaces in industrial, commercial, and outdoor environments; detergent-free and other sustainable cleaning technologies; cleaning tools and supplies; and coatings for protecting, repairing and upgrading surfaces. It operates through the following geographic segments: North America; Latin America; Europe, Middle East, Africa and Asia Pacific. The company was founded by George Henry Tennant in 1870 and is headquartered in Minneapolis, MN.

Publicly traded companies mentioned herein: Nilfisk Holding A/S (NLFSK DC), Target (TGT), Tennant Company (TNC), Walmart Inc (WMT)

Highlights

The presenter is short shares of Tennant Company (TNC), a $1B market cap ($1.3B EV) manufacturer and marketer of cleaning solutions, including “Zamboni-like” machines utilized by retailers to clean floors overnight. The stock is not widely covered by the sell side (just 4 analysts, none at bulge brackets), and Tennant only has one true comp (Denmark-based Nilfisk). In his opinion, based on the previous cycle, TNC is relatively poorly positioned for the current environment given 1) the expensive nature of its equipment, 2) aggressive YoY comps due to winning Walmart as a customers, and 3) exposure to SMBs (EBITDA could decline by 50% if history repeats itself). Also, optimism surrounding the need for its equipment due to COVID-19 is unwarranted. At 1.4x 2020 sales estimates and 13x EBITDA, he believes the stock is priced for a better environment than what’s to come. As such, he thinks the company is likely to earn $2 per share in 2021 (vs. a $3/share consensus estimate) and believes that the stock would be more fairly valued in the $35 - $45 range (assumes a 1x sales multiple and 9x - 10x EBITDA).

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Idea Discussion

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